DRIVERS OF FIRMS' GROWTH: A CASE STUDY OF PAKISTANI SOFTWARE FIRMS
Keywords:
Absorptive capacity, Innovation, Labour Productivity, R&D, SMEsAbstract
This study identified the drivers of firm’s growth such as research & development (R&D), absorptive capacity, knowledge management, networks, access to finance, internationalisation and so forth. This empirical paper analyse the Pakistani software industry and provided contribution to research related to micro analysis of small software firms using cross sectional data techniques. Based on a face to face interview of 69 software firms, this study found that firm size, access to finance, internationalisation (exporting and outward FDI), business improvement methods, and knowledge management have a positive impact on the firm’s labour productivity growth. In comparison, firm undertaking R&D and absorptive capacity showed negative association with labour productivity growth. In summary, this empirical study suggests that high sunk costs, low investment in knowledge-based assets and shortage of skills generally affect the labour productivity of these software firms.
Downloads
References
Abor, J. and Biekpe, N. (2007). Small business reliance on bank financing to Ghana’ Emerging Markets Finance and Trade, 43, 4, 93-102.
Adamou, A. and Sasidharan, S. (2007). ‘The impact of R&D and FDI on firm growth in developing countries: Evidence from Indian manufacturing Industries’, Working Paper, 1-28.
Aw, Bee-Y. (2002). Productivity dynamics of small and medium enterprises in Taiwan, Small Business Economics, 18, 69-84.
Badia, M, M. and Slootmaekers, V. (2009). The missing link between Financial Constraints and Productivity, IMF Working Paper, WP/09/72, 1-39.
Barney B. J. (1986). Organisational Culture: Can It Be a Source of Sustained Competitive Advantage? The Academy of Management Review, 11, 3, 656-665.
Beck T., Demirguc-Kunt, A. and Levine, R. (2005). SMEs, Growth and Poverty: Cross country evidence, Journal of Economic Growth, 10, 3, 199-229.
Beck, T. and Demirguc-Kunt, A. (2006). Small and medium enterprises: access to finance as growth constraint, Journal of Banking and Finance, 30, 11, 2931-2943.
Bezic, H. Vojvodic, K and Stojcic, N. (2010). Export competitiveness, firm behaviour and obstacles for doing business, Poslovna Logistika u suvremenom menadzmentu, X, 11-26.
Cameron, K. and Quinn R. (1999). The Four Major Culture Types’ Third Edition Diagnosing and changing organisational Culture based on the competing values framework, San Francisco, Jossey Bass, 41.
Chapman, R. and Al-Khawaldeh K. (2002). TQM and labour productivity in Jordanian industrial companies’, The TQM Magazine, 14, 4, 248-262
Churchill, N and Lewis, V. (1983). The five stages of small business growth, Hardward Business Review, 3, 30-50.
Cohen, W, M, Levinthal D, A (1990). Absorptive Capacity: A New Perspective on Learning and Innovation, Administrative Science Quarterly, 35, 1, 128-152.
De, S. and Dutta, D. (2007). Impact of Intangible Capital on Productivity and Growth: Lessons from the Indian Information Technology Software Industry, The Economics Record, 83, s1, 73-S86.
Delgado A. M. Farinas C. Jose and Ruano, S. (2002). Firm productivity and export markets: a non-parametric approach, Journal of International Economics 57, 2, 397-422.
Domingo-Serrano, G. and Borras-Cabrer, B. (2007). Innovation and R&D spillovers effects in Spanish regions: A spatial approach , Research Policy, 36, 9, 1357- 1371
Dundas-Hewitt, N. (2006). Resources and Capability Constraints to Innovation in Small and Large Plants, Journal of Small Business of Economics, 26, 3, 257-277.
Fathian, M. and Jafari, M. et al. (2007). Exploring KM features and learning in Iranian SMEs , The Journal of Information and Knowledge Management Systems, 37, 2, 207-218.
Farinas C. J. and Ruano, S (2004). Firm Productivity and Sunk Costs, Discussion Paper, 1-20.
Fosfuri, A. and Tribo A. J. (2008). Exploring the antecedents of potential absorptive capacity and its impact on innovation performance, Omega, The International Journal of Management Science, 36, 2, 187-187.
George, G. and Zahra A. S. et al. (2002). The effects of business-university alliances on innovative output and financial performance: a study of publicly traded biotechnology companies, Journal of Business Venturing, 17, 6, 577-609.
Griffith, R. Redding, St. and Reenen V. J (2004). Mapping the Two Faces of R&D: Productivity growth in a Panel of OECD Industries, The Review of Economics and Statistics, 86, 4, 883-895.
Harris, R. (2008). Models of Regional Growth: Past, Present and Future’, CPPR, SERC & University of Glasgow. 1-55.
Harris, R. and Li, Q. C. (2006). Review of Literature: Causal Link between Innovation and International trade and Investment, UKTI, 1-87.
Harris, R. and Robinson, C. (2004). Productivity impacts and spillovers from foreign ownership in United Kingdom, National Institute Economic Review , 187, 58-75.
Harris, R. and Trainor, M. (1995). Innovation and R&D in Northern Ireland Manufacturing, A Schumpeterian approach, Journal of Regional Studies, 27, 7, 593-604.
Heshmati, A. (2001). On the Growth of Micro and Small Firms: Evidence from Sweden, Journal of Small Business Economics, 17, 3, 213-228.
Jones, N. (2009). SMEs Life-Cycle – ‘Steps to Failure or Success?’ ‘Working Paper, Graduate School of Economics, Assumption University’, 1-12.
Kaiser, H. F (1960). The application of electronic computers to factor analysis, Educational and Psychological Measurement, 20, 141-151.
Kinoshita, Y. (2001). R&D and Technology spillovers through FDI: Innovation and Absorptive Capacity, International Trade and Transition Economics, Discussion Paper, 2775, 1-24.
Koch, A. and Strotman, H. (2008). Absorptive Capacity and Innovation in the Knowledge Intensive Business Services Sector, Journal of Economics of Innovation and New Technology, 17, 6, 511-531.
Kogberg, C. and Chusmir, L. (1987). Organizational culture relationship with creativity and other job related variable, Journal of Business Research’, 15, 5, 397-409.
Leahy, D. and Neary, P. (2004). Absorptive capacity R&D spill over and public policy’, University College Dublin and CEPR, 1-36.
Lu, W. J. and Beamish W. P. (2006). SME internationalization and performance: Growth vs. profitability, Journal of International Entrepreneurship 4, 1, 27-48
Mambula, C. (2002). Perceptions of SMEs Growth Constraints in Nigeria , Journal of Small Business, 40, 1, 58-65.
McAdam, R. Moff, S.; Hazlett A. S. and Shevlin M. (2010). Developing a model of innovation implementation for UK SMEs: A path analysis and explanatory case analysis, International Small Business Journal, 28, 3, 195-214.
Mathew, J. (2007). The relationship of organisational culture with productivity and quality: a study of Indian software organisations, Journal of Employee Relations, 29, 6, 677- 695.
Masurel, E. and van Montfort K. (2006). Life Cycle Characteristics of Small Professional Service Firms’, Journal of Small Business Management, 44, 3, 461-473.
Matusik, F. S. and Heeley B. M. (2005). Absorptive capacity in the Software Industry: Identifying dimensions that affect Knowledge and Knowledge Creation activities, Journal of Management, 31, 4, 549-572.
Miles, E. R., Snow, C. C., Meyer. D. A., (1978). Organisational Strategy, Structure, and Process, The Academy of Management Review, 3, 3, 546 – 562.
Moen, O. Galven M. and Endresen I. (2004). Internationalization of small computer software firms, Entry form and market selection, European Journal of Marketing, 38, 9/10, 1236-1251.
Moktan, S. (2007). Development of Small and Medium Enterprises in Bhutan: Analyzing Constraints to Growth, Journal of South Asian Survey, 14, 2, 251-282.
Moreno, M. A. and C, Casillas, J. (2007). High growth SMEs VS non- high Growth SMEs: a discriminant analysis, Journal of Entrepreneurship & Regional Development, 19, 1, 69-88.
Morris, T. Pavett, M. C. (1992). Management Style and Productivity in Two Cultures’, Journal of International Studies, 23, 1, 169-179.
Nichter, S, and Goldmark, L. (2009). Small Firm Growth in Developing Countries, World Development Economics, 37, 9, 1453-1464.
Reddy, M. (2007). Small business in small economies: constraints and opportunities for growth, Social and Economic Studies, 56, 1/2, 304-321.
Salojarvi, S. Furu, P. Sveiby et al. (2005). Knowledge Management and growth of Finish SMEs, Journal of Knowledge Management, 9, 2, 103-122.
Smallbone, D. (2005). Foreign Direct Investment and SME development: Some policy issues for Transition and Developing countries, Small Business Research centre- Kingston University, 81-102.
Sparrow, J. (2001). Knowledge Management in Small Firms’, Journal of Knowledge and Process Management, 8, 1, 3-16.
Wagner, J. (2007), ‘Exports and Productivity: A survey of the evidence from firm level data’, Working paper, 5580, 60-82.
Westhead, P. (1997). R&D inputs and outputs of technology based firms located on and off Science Parks, R&D Management, 27, 1, 45-62.
Wiklund, Johan and Shepherd, D. (2005). Entrepreneurial orientation and small business performance: a configurational approach; Journal of Business Venturing, 1, 71-91.
